Buyout Buzz Fuels Big Rally for GameStop Stock

The WSJ is reporting a buyout announcement could be announced next month

by Karee Venema

Published on Jan 4, 2019 at 9:58 AM

The shares of GameStop Corp. (NYSE:GME) have shot up 11% this morning to trade at $14.39, after buyout buzz surfaced in a Wall Street Journal report. In an article entitled, "As Videogame Market Shifts, GameStop Struggles to Boost Sales," Sycamore Partners and Apollo Global Management were pegged as potential suitors for GME (subscription required) by a person familiar with the matter, with an announcement expected by mid-February.

It's been a steady drop for the shares since their October 2015 top near $48. More recently, GME stock closed out a historically tough holiday season down 13.6%, and tagged a 13-year low of $11.56 on Dec. 26. The equity finished 2018 with a 29.7% deficit, marking its fifth straight annual decline. Today's pop puts GameStop back above $14 for the first time since early December, and has the stock on track to close north of its 10-week moving average for the first time since Nov. 2.

Given the stock's long-term technical troubles, it's not too surprising to see sentiment skewed toward the skeptical side. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), GME's 10-day put/call volume ratio of 3.00 ranks in the 83rd annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip.

Plus, short interest edged up in the two most recent reporting periods to 27.57 million shares. This represents a notable 27.6% of GameStop's available float, or 9.8 times the average daily pace of trading.

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